Building on last week’s news of troubled music service Guvera, who decided to shut down shop in Australia and focus on emerging markets reported here on Digital Music News, the Australian Business Review is now reporting that two Guvera subsidiaries, Guvera Australia Pty Ltd and Guv Services Pty Ltd, have been returned to company management following a creditors meeting. One of the administrators said:
“The creditors accepted a deed of company arrangement for each company. These DOCAs will provide greater certainty of a return to priority creditors, such as employees, than liquidation of the companies would have done”
This apparently is a much better option than actually closing down shop, allowing creditors to keep company trading. When the companies were put into administration in June, Guvera Australia, which controlled the licenses to run the streaming service, owed about $2 million and Guv Services, in charge of employing Guvera’s workers, owed over $10.5 million according to documents filed with the corporate regulator. The biggest single creditor is the Tax Office, which was owed $10 million by Guv Services.
Adding more fuel to the already burning debt wildfire that Guvera Australia, tried desperately to hide, ARPA and AMCOS, run as a single company, were owed more than $900,000. App developer NextFaze also couldn’t escape Guvera’s runaway debt train, owed over $462,000. Former PR firm Edelmen was also left owed close to $34,000. Going further, Media Partners, a Melbourne media agency, was left owed $235,000, while Tennis Australia and Victoria Racing Club, two organizations Guvera sponsored, were left owed $285,000 and $297,000, respectively.
Speaking to sources close to the company, the Australian Financial Review reported that Guvera hadn’t paid employer superannuation contributions for about 2 years, and while raising $185 million, had apparently given kickbacks ahead of their IPO to AMMA Private Equity accountants when clients invested in the company. In total, Guvera owes around $13 million to staff and creditors.
Former CEO Darren Herft still plans to focus on emerging markets in India, Saudi Arabia, Indonesia and the United Arab Emirates. With a debt trail like this, there’s little doubt that this tragic tale of unpaid debt will most likely repeat itself all over again.
Thanks to Digital Music News user The Hollywood Non Reporter for the heads-up on this story.
Cancel the Debt image by Friends of the Earth International, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).
Daniel Ek’s proven business model is heading same direction!
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More news from the Gurvea train wreck…
information source:
https://mumbrella.com.au/guvera-india-state-chaos-streaming-firms-last-hope-haemorrhages-cash-385337
Guvera India in state of chaos as streaming firm’s last hope hemorrhages cash…
Guvera’s much-vaunted Indian operation – regarded as the lifeline of the company – is in complete disarray with the division haemorrhaging cash, unable to pay its bills and struggling to make its ad-funded model work, Mumbrella can reveal.
The catastrophic position of its Indian business was laid bare in documents from a May board meeting leaked to Mumbrella.
Guvera
The documents reveal an operation in chaos in virtually every area possible, shedding new light on a company that is struggling to survive.
Details of the turmoil emerged just 48 hours after Australian creditors agreed to a Deed of Company Arrangement (DOCA) that has allowed the company to keep trading.
Deloitte – called in as voluntary administrators of Guvera Australia and Guv Services when the company was refused a listing on the Australian Securities Exchange in June – said the DOCA will “provide greater certainty of a return to priority creditors, such as employees, than liquidation of the companies would have done”.
But the state of the Indian business, often portrayed as its standout market and one in which the company has put great faith in, will come as a further shock to shareholders who, so far, have invested almost $200m in Guvera since it was formed in 2008 by Claes Loberg and Darren Herft.
It also emerged that Guvera’s global director of brand strategy, Max Hegerman, is no longer with Guvera after tweeting a reply to the Mumbrella news that the company will keep trading.Screen Shot 2016-08-03 at 8.42.52 am
The document seen by Mumbrella revealed Guvera India reported a loss of more than $82,000 in April after a paltry income of $11,352 and expenses of $93,472, almost $44,000 of which was spent on advertising and sponsorship and a further $31,350 on salaries.
The income more than halved from the February and March figures of $25,567 and $26,901, respectively, which both fell dramatically from the January income of $78,365.
Yet according to sources, the company is seeking a revenue target of $20m in India – a staggering amount given the lack of revenue.
One source close to the business said the $20m revenue target was increased from $2m just after the IPO prospectus was lodged.
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“It was done to make it appear as though India, one of the last remaining Guvera Ltd markets, could sustain the company in terms of revenue and users,” the source said. “It was an unreachable and completely irresponsible amount and reflective of senior leaderships’ complete lack of understanding of the marketplace.”
The document details the slow and non-payment to music labels, suppliers and partners which, Guvera admitted, is “beginning to affect opportunities”. Though one of its partners, Harley Davidson, has been paid, “relationship with partners has strained”, the company said.
A non-payment to Affle, a mobile commerce and marketing firm, was described as “critical”, with the document confirming the Affle board has approved “legal and punitive action”, while a joint-venture with Indian digital entertainment company Hungama Music was put on hold due to non-payment of 2015 rights fees, believed to be $3m.
Sponsorship deals were also under threat, the board meeting update said, including one with the Mumbai Indians, a star-studded cricket team which played in the lucrative 20/20 Indian Premier League (IPL).
Guvera became the “official music streaming partner” of the Mumbai Indians in March, which saw the creation of a Mumbai Indians branded channel, but the brokers of the deal, Reliance IMG, did not get paid its bill of $300,000.
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Another deal, with technology firm Ad:tech, also disintegrated amid Guvera’s financial chaos with the music streaming firm axed from its involvement at September’s iMedia Summit in Kovalam because of its non-payment of bills.
Furthermore, the document also spells out that “few commercial deals [are] closing/renewing”, with the commercial team “struggling with ad-funded model”.
A complete lack of marketing budgets also hampered Guvera’s “commercial/sales and visibility opportunities”, and crippled its ability to drive up the numbers of users.
According to the update, the total number of users in India in April was 6.88m – more than 9m below the 16m targeted by the company.
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Guvera launched into India in late 2014, which at the time became its 13th market. Following its failed IPO in June, Guvera operates now in just four – India, Indonesia, Saudi Arabia and United Arab Emirates. It withdrew from Australia this week, vowing to “focus all efforts in key emerging countries, such as India and Indonesia”.
“After several changes in the product and a strategic re-evaluation of the business, we have decided that in order to achieve sustainable and long-term goals we will focus all efforts in key emerging countries, such as India and Indonesia,” the company said. “Research shows that in these countries, consumers simply can’t and won’t pay for the streaming of music and we feel we can return the greatest value to shareholders.”
Comment is being sought from Guvera.
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